Energy

Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

OPEC's members are divided by many things: language; size; politics; sometimes outright war.

And money. Don't forget money.

If you want to understand why OPEC has responded to its current crisis with all the cohesion of cat herding, some numbers in the Energy Information Administration's "OPEC Revenue Fact Sheet," published on Tuesday, provide some important clues. First up, estimated revenue, adjusted for inflation:

Tight Oil
OPEC's real net oil export revenue is expected to be the lowest since 2003
Source: Energy Information Administration

The estimate for this year, $337 billion in real terms, is barely a third of 2012's peak -- and, uncannily, exactly the same as the consensus forecast for the combined revenue of Exxon Mobil and Chevron in 2016. Of course, those two only have to pay their employees, creditors and shareholders. OPEC's members have about 700 million people to answer to, roughly double the amount in 1980 . So, on a per capita basis, those numbers look worse:

Rationing
OPEC's oil export income per person is back to where it was when prices crashed at the end of the 1990s
Source: Energy Information Administration

What really stands out from that chart isn't just that net oil exports are set to generate less than $500 per man, woman and child this year. It's that even when oil was trading in triple digits a few years ago, the export revenue per person was still less than half what it was at the beginning of the 1980s. The need to diversify away from oil, such as Saudi Arabia is touting, reflects not just an acute crisis but a long-festering, chronic economic condition.

 

The added twist, which is forcing OPEC to crack rather than coalesce, is that while all members are suffering, the degree of pain differs widely:

Gulf States
The gap between OPEC's haves and have-nots in terms of oil export revenue is staggering
Source: Energy Information Administration
Note: Data are for 2015. Indonesia is a net oil importer, so it's export revenue is negative and is excluded from this chart.

Can it be any accident that Nigeria, sitting at the bottom of that chart, is currently convulsed by violence that has taken the country's oil production to its lowest level in 27 years (which in turn pushes the revenue lower)?

What's more, this divide has actually expanded, not compressed, as OPEC's overall revenue has plummeted. This next chart plots the highest per capita oil export revenue of any OPEC member as a multiple of the lowest. Along with Indonesia (a net importer of oil), I've excluded the outliers of Qatar and Kuwait here.

For Richer or Poorer?
Excluding outliers, oil export revenue per capita at OPEC's top end is more than 20 times the lowest
Source: Energy Information Administration, Bloomberg Gadfly analysis
Note: Excludes Indonesia, Kuwait and Qatar.

History suggests a good recipe for dooming an organization, regime or even a country is to take a pie, shrink it dramatically, and divide the pieces very unevenly. That's where OPEC finds itself today.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. In order to make this comparison, I've adjusted the numbers to include Ecuador and Angola in the 1980 number and Indonesia in 2015's number (it rejoined OPEC towards the end of last year).

To contact the author of this story:
Liam Denning in San Francisco at ldenning1@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net